Wednesday, January 29, 2014

In an interview with Greg Hunter on his YouTube channel Catherine Austin Fitts said, "What we need now is a global debt for equity swap."

In other words, let the sovereigns out of their unpayable debt by selling off public assets to the global plutocratic class.

This will seal the deal for generations of neo-feudalism to come.

More and more, I think the only way populations will throw off this yoke will be by national strikes that shut the corporatocracy down. I'm not advocating national strikes, but I don't see any way to combat entrenched neo-feudalism through democratic means, as the democracies have been eviscerated through the corrupting powers of money.

Talk continues to percolate through the Intertubes of the imminent "global reset"....

Tuesday, January 14, 2014

The Intertubes are buzzing with talk of a global currency reset, usually in conjunction with a sale of a DVD that the seller alleges contains secrets that "the elite" have imparted to him that will make the difference between survival and adject ruin in your life. The most cogent of these is by Pastor Lindsey Williams here.

The basic argument is that Christine Lagarde has secured agreement from some 204 nations to enter into a new managed float currency system that, however, will move currencies toward new exchange rates based on national "assets." America, being the premier debtor nation in the world, would be devalued in its new channel, especially relative to the yuan. This of course is what a lot of people would like to see happen to stimulate exports. This system is allegedly to be kicked off by the end of first quarter 2014. There will be some sort of gold-backed or basket-based new international reserve currency introduced.

Obviously America is hit by stagflation as goods from China increase in price by 30 percent or so. Simultaneously the government in 2014 or 2015 will seize 30 to 50 percent of public and private pension funds to pay down government debt.

I have little doubt that the dollar's reserve currency status is weakening. Many significant trade deals have been recast in the past few years out of dollars into other currencies, or in some cases, into commodities. But if such negotiations for a global currency reset have taken place they have been kept very quiet.

The problem I have with this story is that it conflicts with what I see as the most likely outcome, the credit supernova, in which all countries succumb to temptation to beggar the rest of the world to inflate out their debt and depreciate their currency. America's dominance and relative safety (note the negative yields on recent T-bill auctions) would seem to augur a relatively strong dollar in such a supernova scenario.

However, Williams does make a credible case that the American economy will totally collapse in 2015 when the business mandate of Obamacare takes effect. The press has recently given coverage to the profit guarantees that the health insurance companies enjoy under Obamacare. Recent retail sales numbers certainly suggest a collapse of demand (see this).

The good pastor also maintains that the smart meters that have supposedly been put on most American houses are in fact microwave mind control devices that have softened up the population for the imposition of the totalitarian new world order without violent resistence (this seems to entirely based on the allegations of one Barrie Trower, a British physicist).

What economists call "effective" demand collapses when most people's incomes are falling, even if total income (GDP) is ostensibly rising. The rich just don't spend enough or on the right things to keep the circular flow going in a healthy way. And when the most attractive investment opportunities are offshore, anyone with a mutual fund can send their capital abroad. Add to this the bad debts of the banks that they have transferred onto the backs of the American (and Irish, and Spanish, and Portuguese...) people and the stage is indeed set for collapse. The question will be whether the rich will push the poor into a die-off (life expectancies are already declining among the lower classes in America, and probably elsewhere) or whether the population of the world will learn to share in the context of a just society.

In any event, we'll see if there's anything to all the fevered talk about the "global currency reset" within 90 days.

Monday, January 13, 2014

In the same interview, the new Fed chair states that the reason QE is good is because it causes rising house and stock prices, and that this wealth effect causes people with houses and stocks to spend more money, which creates more jobs for other people, who don't have houses and stocks.

And yet nonsensically the Fed chair insists that "it isn't true" that QE increases inequality or that it is "just helping rich people."

Who owns houses and stocks, the working poor or the already rich, especially in the case of stock ownership, which is heavily concentrated in the top 20 percent of the population in the US?

This is trickle-down economics; and one thing we know about trickle-down economics is that it increases inequality.

A more pure statement of the Austrian proposition that the control of credit benefits those with first access to the new money cannot be imagined.

Friday, January 10, 2014

With the adaptation level at 8.1 and the “current unemployment rate” at 6.7, the confidence cushion has widened a bit, but I view this as a holding action. I don’t know why people pay attention to the unemployment rate any more, but then, I am a professional. Most people are not obsessed with the increasingly flaky economic data as I and other readers of Zero Hedge et alia are.

With continued weakness in the Michigan series, and a topping formation in the A metric, the collapse, when it comes, will be sudden, as it always it.

Wednesday, January 8, 2014

How even the nostrums of decades of accepted mainstream academic economics are debased by propaganda in these latter days!

As John Hussman has pointed out, the euphoria of the current expansion (among the haves) is largely due to the legerdemain of FAS 157, the "pretend and extend" statement.

But FAS 157 was not enough.

Graduate students have been taught for decades that excess reserves are just that, in excess of required reserves, and therefore do not contribute to money multiplier money creation, or to movement of the real economy.

So "quantitative easing" (taking bank assets into the Fed and letting them serve as reserves) when it involves adding to already excessive levels of reserves should not expected to have an effect on the real economy. And it hasn't, by definition.

So why do it? The reason for QE is simply to sweep the mountains of bad debt on the banks' balance sheets into the unauditable fetid swamp that is the "Federal" Reserve System. It is "quantitative erasing" of these bad debts and magical transmutation of them into the gold (for the bankers) of high-powered reserves, so that the bonuses may increase!

The Fed has never to my knowledge reported on the losses on the assets it holds.

So I gag when I hear that Fed policy is going to remain "accommodative." It is a measure of the level of false consciousness even among supposedly professional economists that no one is calling out the Fed on this canard. ZIRP is so far from being repealed (see Hussman's beautiful chart relating reserves as a percent of GDP to short rates a couple of posts ago) that the dreaded "taper" can a priori have no effect on short rates; the only effect might be lower long-term inflation expectations, which would flatten the yield curve, which would be bearish for the economy, other things equal.

So I just think of QE as "quantitative erasing" and further plunging into the monetary chaos to come.

The banking system remains an anvil around the neck of the American economy. The Fed needs radical reform, or better, to be abolished.

And when the crisis comes, I pray that the haves in America will rediscover a collective conscience and realize that the countrymen and women they have expropriated are their closest relatives.